Berman v. Schweiker

• Decision Date: 27 July 1983
• Docket Number: No. 82-1621,82-1621
• Citation: Berman v. Schweiker, 713 F.2d 1290 (7th Cir. 1983)
• Parties: Allen S. BERMAN, Plaintiff-Appellee, v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Defendant- Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1290

713 F.2d 1290

Allen S. BERMAN, Plaintiff-Appellee, v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Defendant- Appellant.

No. 82-1621.

United States Court of Appeals Seventh Circuit.

Argued Dec. 1, 1982.

Decided July 27, 1983.

John Cordes, Atty., Civ. Div., Dept. of Justice, Washington, D.C., for defendant-appellant.

Jonathan B. Newcomb, Chicago, Ill., for plaintiff-appellee.

Before CUDAHY, COFFEY and TIMBERS, ^* Circuit Judges.

TIMBERS, Circuit Judge.

This appeal by the Secretary of Health and Human Services requires us to resolve at least within this Circuit, a dispute as to whether attorneys' fees granted in a Social Security case to the prevailing party under the Equal Access to Justice Act (EAJA or Act), Pub.L. No. 96-481, 94 Stat. 2325 (1980), retroactively applies to attorneys' fees for work performed prior to the effective date of the Act. The Secretary appeals solely to challenge the district court's ruling which allowed a retroactive award of attorneys' fees. We hold that the EAJA does apply to attorneys' fees for work performed prior to the effective date of the Act and that any other interpretation would require us improperly to restrict the application of the Act. We affirm.

I.

The instant proceeding stems from the difficulty encountered by appellee Berman in obtaining earnings record credit for his work as an historical markers supervisor for the Illinois Department of Transportation (Department) from November 1974 through May 1975. Under the terms of his contract with the Department, Berman served as a consultant. He advised the Department whether it should approve requests for the erection of historical markers. He received $6,920 for his work. This was paid in eight monthly installments. ¹ Despite his having been compensated by the state, the Social Security Administration (SSA or Administration) refused to credit for earnings record purposes his service as the Department's historical markers supervisor. His appeal to an Administrative Law Judge (ALJ) was unsuccessful. The ALJ concluded that Berman was a contractual services employee of Illinois during the period he worked for the Department and that this category of employment was not covered by the relevant provisions of the Social Security Act. Subsequently, the Appeals Council upheld the ALJ's decision and it became the final decision of the Secretary.

Berman then commenced the instant action pro se in the United States District Court for the Northern District of Illinois, challenging the adverse administrative ruling. The case was assigned to Judge Prentice H. Marshall. On October 16, 1980, Judge Marshall appointed Lawrence P. Bemis, Esq., of the firm of Kirkland & Ellis, as counsel for Berman. ² In his letter of appointment, Judge Marshall indicated that Berman was willing to pay the Administration "a substantial sum of money in order to straighten out his record." The judge stressed to Bemis that "this case will not produce a fund from which you could be compensated and there is no provision under the Social Security Act for an award of attorney's fees." Soon thereafter, on October 21, 1980, Congress enacted the EAJA, which provided for the awarding of attorneys' fees to prevailing parties in certain adversary adjudications and civil actions against the United States. ³ Consequently, at the time of his appointment of Bemis, Judge Marshall correctly informed him that there was no statutory provision for compensating him. In short, there would be no departure from the general American rule regarding attorneys' fees. ⁴ The Social Security Act, which then was the relevant statute, provided only for a limited statutory exception to the general American rule in cases involving the award of past-due benefits. 42 U.S.C. § 406(b)(1) (1976) (providing for grant of attorneys' fees out of amount of past-due benefits).

After the appointment of Bemis as counsel for Berman, both parties moved for summary judgment. In a memorandum order dated August 14, 1981, Judge Marshall held that the ALJ erroneously had concluded that Berman was a contractual services employee of the state. The judge observed that this type of position was not even created until July 1, 1975, after Berman had completed his services for the Department. ⁵ The judge also rejected the ALJ's application of the relevant sections of the Social Security Act to the instant action. ⁶ Judge Marshall therefore reversed the decision of the Secretary and remanded the action to the Secretary with instructions to grant Berman four quarters of Social Security coverage for 1975. ⁷

After prevailing on the summary judgment motion, Berman applied for attorneys' fees. In an opinion dated February 16, 1982, 531 F.Supp. 1149 (granting fee application), the district court at the outset held that the instant action was pending on October 1, 1981, the effective date of the EAJA. ⁸ After making this determination, the court held that the instant action satisfied the substantive provisions of the EAJA. Specifically, the court held that the instant action was covered by the EAJA, 28 U.S.C. § 2412(b) (Supp. IV 1980), since the Secretary contested Berman's action in the district court. As explained below, the EAJA applies to an SSA claimant's district court action, although a claimant cannot obtain attorneys' fees under the EAJA for representation during an administrative SSA proceeding. H.R.Rep. No. 1418, 96th Cong., 2nd Sess. 20, reprinted in 1980 U.S.Code Cong. & Ad.News 4984, 4999; 126 Cong.Rec. H-10220 (October 1, 1980) (recovery of attorneys' fees in Social Security cases limited to actions in which Administration contests action in federal district court) (remark of Congressman Railback). The district court further held that the standard for awarding the attorneys' fees under the EAJA was met in the instant action, since the position of the United States in the litigation was not "substantially justified." 28 U.S.C. § 2412(d)(1)(A). ⁹ The district court, applying the Act's reasonableness standard to determine whether the government's position was substantially justified, held that it was not. The government's position was erroneous as a matter of law since the Secretary relied on a defense that Berman was a contractual service employee when this category of employment did not exist during the term of the contract. H.R.Rep. No. 1418, supra, at 10 (test of whether a government action is substantially justified is essentially one of reasonableness). ¹⁰ The district court accordingly granted Berman's fee application in amount of $2,310.50 in fees and expenses plus costs. ¹¹

On the Secretary's motion for reconsideration, the court rejected his contention that sovereign immunity bars an award of attorneys' fees under the EAJA. The court also held that there is no indication in the statute that fees could be divided between pre- and post-effective date work.

II.

On appeal, the Secretary challenges only the grant of attorneys' fees under the EAJA. He claims that the court erred in awarding attorneys' fees for work performed prior to the effective date of the EAJA. Consequently, the Secretary does not dispute on appeal that the instant action was pending on October 1, 1981. Furthermore, he does not argue that the government's position was substantially justified. The sole question presented on this appeal, therefore, is the narrow one of whether a court is precluded from granting attorneys' fees for work performed before the effective date of the EAJA. ¹²

The Secretary's argument is twofold. First, he argues that Congress in enacting the EAJA did not intend to provide for awards of retroactive attorneys' fees. Second, he argues that the district court (and other federal courts that have allowed retroactive attorneys' fees under the EAJA) failed to consider the proper application of the sovereign immunity doctrine. We shall discuss each of these arguments in turn.

RETROACTIVITY UNDER THE EAJA

The EAJA was enacted by Congress in 1980. By its terms, it expires in 1984. See EAJA, Pub.L. No. 96-481, §§ 203(c), 204(c), 94 Stat. 2327, 2329 (1980). ¹³ House Report 1418 makes it clear that the EAJA is experimental in nature--an attempt to alter for this limited period the American rule regarding attorneys' fees. Under the American rule, as indicated above, each party traditionally bears his or her own attorneys' fees. Alyeska Pipeline Service Co. v. Wilderness Society, supra note 4, at 241 (prevailing party ordinarily not entitled to attorneys' fees from losing party); Nemeroff v. Abelson, 620 F.2d 339, 348 (2nd Cir.1980) (although origin of American rule is unclear, there is no doubt about its current vitality). ¹⁴ In recent years, Congress by statute has created a number of exceptions to this general rule. ¹⁵ Many of these statutory exceptions were intended to address specific types of litigation of public interest. ¹⁶ For example, in the wake of the Supreme Court's decision in Alyeska, where the Court limited the inherent powers of courts to award fees when the prevailing party acted as a private attorney general, ¹⁷ Congress enacted the Civil Rights Attorneys' Fees Award Act of 1976, 42 U.S.C. § 1988, which allows a court in its discretion to grant attorneys' fees to the prevailing party in civil rights actions. The EAJA, in contrast, was not intended to address the problems of a particular class of litigants in pursuing their actions against the federal government. Instead, the EAJA applies generally to a wide range of cases. It sets forth, however, specific prerequisites for cases in which an agency or court may allow attorneys' fees to a party who prevails against the government.

The EAJA is codified in two sections of the Code: 5 U.S.C. § 504 (Supp. IV 1980) and 28 U.S.C. § 2412 (Supp. IV 1980). Section 2412 sets forth the general rule regarding the liability of the federal government for fees and costs. Section 504 provides for an agency's liability for fees and...